- Reuters/Chris Wattie
Here is what you need to know.
2 European banks failed the Fed’s stress tests. While all of the major US financial institutions passed the Dodd-Frank stress tests, two European banks failed. Deutsche Bank Trust Corp. and Santander Holdings passed the high-stress scenario, but the Federal Reserve objected to their capital plans because of “broad and substantial weaknesses across their capital planning processes, and insufficient progress these firms have made toward correcting those weaknesses and meeting supervisory expectations.” Both of these institutions failed the test last year. Not to be forgotten, Morgan Stanley received a conditional non-objection and must resubmit its plan by December 29.
Wall Street banks announced their share-buyback plans. After passing the Dodd-Frank stress tests, Wall Street banks announced their stock-buyback plans. Among the notables, JPMorgan will buy back $10.6 billion worth of stock, while Citi and Bank of America will repurchase $8.6 billion and $5 billion worth of shares. Goldman Sachs will also buy back shares, but it did not release an amount.
Anthem’s planned takeover of Cigna is in jeopardy. Anthem’s $48 billion takeover of Cigna is in jeopardy after the Department of Justice said the deal would threaten competition. Specifically, the DOJ is worried that large employers would have reduced options for finding insurers that can provide coverage on a national scale, a person familiar with the matter told Bloomberg. The DOJ is willing to listen to solutions but is skeptical that a resolution can come from selling parts of the business, Bloomberg reports.
Oil is on track for its best quarter since the financial crisis. Back in January, West Texas Intermediate crude oil touched a 14-year low, falling below $27 a barrel. Fast forward to Thursday, and the energy component is up about 85%, near $50, thanks to supply disruptions in Canada, Kuwait, Nigeria, and other oil-producing nations. For the second quarter, WTI is up about 29% and on pace for its best quarterly advance since 2009.
Taiwan cut rates. The Central Bank of the Republic of China (Taiwan) lowered its key interest rate for a fourth straight meeting. Thursday’s cut of 0.125% pushed the central bank’s main policy rate down to 1.375%. The decision was widely expected, and more rate cuts are likely before the end of the year as the central bank looks for ways to combat the slowdown in China, the biggest importer of Taiwanese goods.
UK GDP held. Data released by the Office for National Statistics showed that the UK economy expanded 0.4% in the first quarter. The final reading was unchanged from the previous look and in-line with estimates. The data is expected to slow in the second quarter, however, because of the uncertainty surrounding the UK referendum. The British pound is stronger by 0.2% at 1.3458.
Eurozone CPI ticked up. CPI Flash Estimate climbed to +0.1% year-over-year in June from -0.1% in May, according to Eurostat data. Services saw the biggest gain, +1.1% YoY, followed by food, alcohol, and tobacco (+0.9% YoY), and nonenergy industrial goods (+0.4% YoY). Energy was a drag as prices tumbled 6.5% versus a year ago. The euro is up 0.2% at 1.1150.
Stock markets around the world are up. France’s CAC (+0.7%) leads the gains in Europe after Hong Kong’s Hang Seng (+1.8%) posted a strong overnight advance. S&P 500 futures are up 5.75 points at 2,072.50.
Earnings reporting remains light. ConAgra, Constellation Brands, and Darden Restaurants will report ahead of the opening bell, and Micron will release its quarterly results after markets close.
US economic data trickles out. Initial claims will be released at 8:30 a.m. ET, and Chicago PMI will cross the wires at 9:45 a.m. ET. The US 10-year yield is higher by 2 basis points at 1.53%.